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The Communicators

News/Business. People who shape the digital future.

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California 44, Steve 6, Pennsylvania 3, Mr. Horton 2, U.s. 2, Joe Crosby 2, Sarah Griffith 1, Jerome 1, Macy 1, Eeb 1, And Wal-mart 1, Beyers 1, United States 1, Joe 1, Michigan 1, Amazon 1, Massachusetts 1, Us 1, Del Bianco 1, Mountable 1,
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  CSPAN    The Communicators    News/Business. People who  
   shape the digital future.  

    October 22, 2012
    8:00 - 8:30pm EDT  

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and now who is included? >> guest: prior to the law, the sales tax didn't apply to companies that had affiliates and worked through various different groups here in the state of california. the law broadened the definition of who actually qualified, to include those individuals. so, now, online retailers who have affiliates in the state of california, who also have some form of brick and mortar, either directly or indirectly working through other groups and partnerships and so forth, have nexus in california by definition of california law and, therefore required to report and collect the use tax to the state of california. companies that are now included would include amazon, best buy, and wal-mart, that are making
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sales online. there are other criteria you have to make a million dollars, i believe in total revenue, and ten thousand dollars a year to california consumers, something along those lines. >> now, mr. horton, how much in revenue does the state of california expect to generate through this new taxation policy, and what's the rate of taxation? >> peter, the rate varies, depending on the definition, where the product is delivered, but it's somewhere around 9.75%. the total revenue that the state of california anticipated it was losing was $1.4 billion. we believe that this new law will allow us to collect and generate additional $317 million a year, of which approximately $83 million attributed to amazon
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alone. >> host: now, 9.75%, is that the same as the state sales tax. >> guest: the tax rate isle and the same as the state sales tax. because we have in california a destination tax so depends on where the product is actually delivered and there are other transit taxes that are included in the overall rate. >> jerome orton is jeremy of the california state board of equalization. now, we want to introduce you to a couple more folks talking about this issue. first, steve, of a group called net choice. and joe crosby with the retail industry leaders association. gentlemen, m del bianco, what's your group and what is its position when it comes to the sales tax?
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>> we're a coalition of ecommerce companies and online platforms. our position is similar to what you hear. you do a lot of book author interviews, and if you had the authors of the constitution, they would say they were worry bed the colonies erecting tariffs and trade beyers so the article in the constitution cities states can't expect interstate commerce, only congress can. and it's in keeping with the constitutional provision. california is simply saying if you have presence here through some interesting definitions, you have to collect for california. so it doesn't interfere with interstate commerce because they're considering anyone who has an affiliate there or partnership in california to already be a california company. >> so, two things. name a group that's -- name a corporation that is a member of net choice, and are you -- so,
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are you supportive of what california has done? >> our members are folks ike ebay, pay pal. amazon is not. companies with platforms for ecommerce, that enables other businesses, and our position is california has taken too aggressive a step at asserting you have presence in california simply because you paid for an advertisement there. i'm gratified to see that california set a very, very reasonably high small seller exception, and they had to do a million a year in california and 10,000 a year through the partnerships and affiliates, and that level of small seller exception is insulating small companies from burdens they couldn't bear. >> mr. cross by, what's your group's position? >> guest: the retail industry leaders association represents
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retailers across the board, including the larger retailers in the country and in the world, and they're interested in seeing, after 20 years of discussion and debate, a level playing field created, as steve says, through congress. the congress ultimately has the authority to regulate interstate commerce, and we think it's appropriate, with some of the legislation out there and -- to make it so that all retailers, above a certain threshold, can collect taxes in all the states where taxes are legally due. >> what california did, is that sim mix fission indication in your -- simplification. >> we north the steps california has undertaken, and california is doing everything it can under the limitations supreme court placed upon the states. ultimately congressional interaction is necessary, intervention is necessary to ensure that retail is treated similarly across the board so
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anyone who is selling is collecting tax, and doing so in a way they can do easily enough with whatever simplifications congress might impose. >> we want to introduce you to one more member of the panel. sayre h -- sarah griffith. >> we have several bills pending before congress, and seems as the we need some sort of federal intervention to kind of get the issue taken care of. are we going to see movement on any bills currently building? >> that's a great question. it is a fool hardy think to predict congressional acts, especially when they're coming back after the elections for a relatively short period of time. we're working very hard. there's a lot of interest, as you know. this year has been unprecedented
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in terms of the attention that congress has given to this and other state tax issues, so we're continuing to work diligently on it and are hopeful that when congress resumes its work there will be an opportunity to move this forward, one of the various bills out there. >> there has been movement as you know, and i testified at each of the last two hearings on these bills, and that movement is constructive. it's focusing on congress' role in protecting interstate commerce, and congress taking serious what simplifications they can require before allowing states to collect taxes frommenseses in the in that state. so i'm glad to have opportunity talk about rates. there's over 9,000 different rates and states have not agreed on sage filing form. so we're on the right track to have that conversation. but will ill happen in 2012? i doubt it. >> in terms of the
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simplification we need, what your thought? are there things that congress should focus on they haven't yet? >> the legislation differs in the kind of minimum sim mix fission simplification. they all include the notion that the states have to provide some sort of software. you see it's not enough to have software that just looks up a rate for a given home address. software has to do electronic filing for all the states. automatic remittance to every state, and there has to be compensation for vendors. software installation is expensive. handling questions from customers in 46 different states is going to be expensive for business. they need compensation, we have to streamline the rates. these bills don't require states to have the same definition for items that are taxable. >> in terms of providing
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software, how are states going to come up with the funds. is that going to play factor? >> they claim they'll pay for that out of the new revenue, and joe and have been involved in the project over a decade, and streamline has self software vendors who agreed to develop and certify and deploy software, as long as they get to keep a piece of the action, the sales tax that is collected. they don't always do all the integration that retailers and small businesses need and that's where more congressat leadership will be needed. >> these things can be worked out. for me it's exciting that, after almost 15 years of working on this, sitting next to steve, we're talking about not whether it should be done but how it should be involved. and think there's a general recognition now there's no principled rope, either legally
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or economically, that sales taxes should not be collected one -- on remote sales. simply a question of, how should they happen? with regard the sim mix fission indications, the bill does vary somewhat, and they vary from bills that have been out there previously, and it reflects congress' normal balancing of the needs for interstate commerce versus the sovereignty rights of the states, and the supreme court said, here's the line, but it's it to congress to determine where the line should be placed and that's what they're doing right no in the discussion on capitol hill, what is the right balance to ensure that the playing field is level for all sellers, while not unduly burdening sellers who do not have a physical presence in the state or putting too much of a burden on smaller sellers and what does that mean? so i think although things are going on, and i agree with steve this is moving forward in a productive way and hopeleful we'll get activity soon.
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>> if you represent a macy's or wal-mart in the retail industry leaders association, they sell online plus brick and mortar. so, where is the lost revenue for them? is there lost revenue for them? >> the revenue is the state's revenue. the retailers are collecting it on behalf of the state. >> one of the arguments that brick and mortar stores have made is we lose revenue because it's cheaper to buy automobile. >> if you look at topline revenue, the competitive advantage that a seller that is not required to collect tax has, jerome was talking about the rate in california, on average 9.75%. the consumer has a legal responsibility to remit taxes, whether or not collected from by the retailer, the so-called use tax, but very few folks does that. most consumers, by now this is your last tax-free shopping day.
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that's not accurate. i wasn't tax-free but was not going to be lengthed from the seller and it's up to you and the man in the mirror to determine whether that's paid or not. >> the notion of fairness. fair is when everyone plays by the same rules and today that's what happened. every business collects and files sales tax for everyplace has a fall presence. this is a move to let states force businesses who don't have a presence in their state, to collect, and that really shifts a disproportionate burden on we call them remote retailers inch california, mr. horton told us part of his law would target wal-mart.com, and they already collect in california, they have a physical presence. what's new is it that amazon
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began collecting in california, and amazon is a big part of their expected revenue. so enough fact the fairness argument and the level playing field is so important, i guess a week into it we'd expect a lot of store in california to see growing sales as customers flock into their stores instead of buying online. well, don't hold your breath. that's not likely to be the case. people buy online for convenience, choices, and convenience without even getting into the sales tax. >> is ebay an exception since it's often many used items? >> well, i would say that less than half of ebay is used items, and ebay doesn't sell anything. it's a platform and a fabulous business platform for companies that would otherwise never reach that audience with their new or used items. eeb -- ebay was look ought for the interests of sellers around
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the united states who had california purchasers. should a small pennsylvania business have to collect e.r.a. mitt, and file, and face audits from california because it has handful of california customer? i'm glad california said the answer to that was jimmy,0. no they had to be doing at least a million doors a year in california before they had to look in the eyes of the challenges of collecting for that state. >> if you had an ebay seller who reaches that amount -- if they are a million in california, plus at least 10,000 a year that they spend with a california web site or publisher, which would be the nexus to california, since that california business would be in the eyes of the boe, acting as their agent. >> i'd like to take a moment to get back to the idea of fairness. fairness is a concept that is interpreted by the individual, and steve posited it's only fair because of the physical presence
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the retailer has. certainly there's fairness when you have a marketplace country where there are very few limits to -- very few barriers to commerce, that all of the sellers are affected. and certainly, although people shop online or in stores for a variety of reasons, if you just look at all the news articles coming out of california, you had be hard pressed to convince me that not paying taxes was occupy -- one of them. >> if i can follow up on that. it's a great point what the papers cover. but you can also learn a lot by watching what the most effective company is telling its wall street analysts pursuant to security and exchange commission rules, amazon.com told analyst is last month, and said, you're about to start collecting sales tax, 10% in california. isn't that going to put a dent in your sales? it's the one/seventh of the u.s.
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economy, the largest market frame. the answer from amazon was an unequivocal, no. they've began collecting in many states and they don't see a lowering in sales. it proves people aren't buying on amazon to avoid the sales tax. they pay for shipping and have to stand in line at the post office or ups store to return something. so it's not a saving of sales tax, and if california businesses are looking for this to save them, they have another think coming. the biggest threat is the wal-marts and tarrings and shopping malls and not the internet. >> in terms of fairness -- and let's take it to the small business -- collecting sales tax seems to be a huge burden on -- maybe some of your small businesses are going to be below some of the thresh holds but still some that are relatively small, have national presence because they're online. it seems very burden some for them to have to try and figure
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out their sales tax liability. is it fair, then, to ask them when they stand to lose money, that they nonetheless have to collect sales tax? >> i think certainly there is an administrative burden of collecting sales tax that all sellers face and that's one of the important things about the congressional legislation, making sure that the small business exception is set at a level so as not to burden the very small retailers. and then the other simplifications are sufficient not through just the provisions of software that works, that those smaller, and even mid-size businesses don't pay in any more than necessary to deal with the collection costs improve think it's also important to note, there are small sellers across the country who are supporting this legislation, including small ebay sellers. there are folks on both sides, even down at the small business level -- it's not as if it's monolithic.
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you have small businesses on both sides and large businesses, ebay has not been a fan of this legislation. mean its small sellers have come out publicly in favor of this legislation. >> you know, fairness is a big position right now. amazon, for instance, will be collecting for over half the u.s. population by 2014, because they are have aggressively expanded their presence in california they have two distributions centers to have same-day delivery, and if you're already correcting from most of the country, you would probably take any little bit of simplification as a way to reduce your costs, and you like the idea it imposes new burdens on your competitors. so a lot of what amazon has done is to shift burdens it never had to bear before it became a $50 billion company, and amazon at this point would love to see those burdens imposed on the
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tiniest of its competitors. >> is there -- in looking at the bills and their differing thresholds, there is one that is better -- do you have an opinion on what the threshold should be to define what a small business is? >> the streamlined sales tax governing board had done a study on what small businesses were spending out of their own pocket to collect sales tax and they concluded it was 17 cents for every dollar of tax they collected for businesses under a million a year in sales. and that kind of burden was foremost in the mind of trying to come up with a small several exception. over time that number has -- it's ininstructive to look at last year, based on international retailer, the top 500 retailers here account for 90% of the uncollected sales tax. so, the states could potentially grab 90% of the sales tax they want to collect, and said that small seller exception at number
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5 seller. that's 15 million year in sales. california set it at a million in sales in california. if they're one/seventh of the national economy, a million times seven is seven million. they're given the equivalent of seven million exception there. >> the study came after it, it's help toll boil it down to numbers. if you're selling a million dollars worth of goods. the sales tax rate is 7%. you're collecting $70,000 in tax and i was your costs are 17% of that it's costing you $10,000 a year or .1 of 1% of your sales. it's not an insignificant sum nor ensure mountable. one of the bills sets the threshold at baseball so where that study looks at sellers over a million, the costs drop quickly and significantly. the other thing that is important is that the study was dub before any of the simplifications that were put in
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place or contemplated we are put in police. presumably those simplifications will reduce the costs. down do zero? no, but to a level where the burden is something that can be dealt with. >> steve, and joe, we have been talking about california quite a bit, but is there a state in your view that has done it well and done it right? >> many states maintain a single tax rate across the entire state. they don't allow the local cities and counties to add a mosquito abatement tax, or having a always tax holiday where you don't pay any sales tax on the first $50 of school supplies during certain days. rules like that make collection of sales tax across the country insanely complex. so pennsylvania is trying be simple. they exempt digital download and they're not members of the streamline sales tax because
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they want to maintain what they call a business friendly environment. >> i think this highlights the balance i talked about earlier that congress has to strike between the burdens and state sovereignty on the other. many of those things that make the sales tax more complex are things that consumers and voters like. sales tax holidays, caps and thresholds so you're not paying sales tax on a full price. those are things that consumers and voters like so it's a balance on one hand between those desires of the voters the states and the desire fireness and also for the states to be able to maintain their taxes in a way that makes sense so that to the extent the taxes being imposed, it's actually being collected. and a number of states have done things like california. i think all of them -- you asked a mod until i think ultimately it's congress that's the model. there's only so much each individual state can do. there's no way for an individual state to impose its tax system on another state. no can they solve the larger
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problem that the supreme court decided without congressional intervention. >> assuming that in the perfect world we had one of those bills enacted this year, how long would it likely take to get presumably software still has to be developed, and then implemented. any sense of how long that would take? are we looking at like a five-year down the road we're starting to collect or next year? >> some of the legislation in congress is -- requires such drill trivial things for the states to do that many of them would begin to demand tax collection immediately and would not take years. software vendors are eager to get paid. the bigger question is not how long but how much would it bring in. some of the numbers you heard are exorbitant exaggeration. i used just the commerce department numbers and the most this could be is $12 billion nationwide of new tax revenue.
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that sounds like a lot but it's over 50 states, and 12 billion represents just about half of 1% of total sales revenue. this is not the silver bullet that is going to save the states. >> the revenues won't save the states, revenue from any one tax isn't going to solve them but they would certainly be happy to have that money coming in on legally owed taxes that aren't being collected today. and this is not simply about revenue. it's about fairness. steve, if i remember correctly in putting the numbers together you looked only to business and consumer sales. >> that's right. >> so 93% of internet commerce is business to business, not business to consumer. there's a higher use tax compliance with business sales but nowhere near 100%. so i think steve's $12 billion number probably understates it because it shrewds 7% of ecommerce, a significant percentage of which is getting collect it bud not
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all of it. and that is 16 times more than b to c sale, even a small uncollected amount can generate revenue above what steve articulated. i. >> in the more likely scenario we don't have a bill passed this year, are we going to see more movement on streamline sales tax? >> next year? it will be back. it always comes back. the states are in a fiscal crunch. streamline sales tax has lost steam and is in badly in need of reinvigorization, so i think it will come back next year. and there's a lot of large companies willing to lobby to bring the bill back this year, and they're in alliance with tax collectors who would like to see the extra revenue. so it will be back next year and i hope the conversation drives straight in on the simple odd. being able to challenge states in federal district court if a state doesn'ted amer to the sim
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mix mix indications. >> any stayeds where there could be further legislation or action? >> i think assuming nothing happens in congress this fall, that there will be some action in the states. a lot of states have already done what they can and are now relying on congress. i can see potential some action in massachusetts and maybe wisconsin and potentially michigan, and a few others. pennsylvania, although they have already done some things on the regulatory side. but it bill definitely come back. and i think the issues that the federal government is dealing with, with its own finances, and the likely impact on state governments, of the changes the congress is considering, make this a very attractive thing to consider. if you're on the one hand going to reduce federal fundses to the states you should at least give the states the tools to collect the taxes they're already imposing. >> joe crosby with the retail industry leaders association, steve is with net choice,
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executive director, and cara, our guest reporter, is with state tax notes, the legal editor. thank you for being on the show. >> thank you.
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>> when i watch c-span, i particularly like the congressional hearings. sometimes you actually have the hearings. various pieces of legislation. but more importantly you carry the house of representatives' speeches. i found the congressional hearing coverage of particular interest, like the subject matters with veterans affairs or appropriations but if you're reading about something in a newspaper, you get an idea this is public interest but go to